News & Insights

How Russian Retailers Can Prepare Today for Tomorrow’s Gains

The double digit growth rates Russian retailers achieved last decade have not returned since the end of the recession, but demographic and economic trends suggest there will still be plenty of opportunity in the years ahead. Retailers should prepare today to capitalize on the opportunities of tomorrow.

Two areas where Russian retailers can realize significant upside sales potential are with fresh food offerings and private label products.

Russians spend about half of their household grocery budgets on fresh foods like meats, produce, and dairy. But, only about 20 percent of grocery retailers’ revenue currently comes from fresh food categories, as Russian consumers continue to purchase many of their fresh products from traditional vendors. By contrast, in most other European markets, the bulk of fresh food spending has shifted to modern grocery stores. Russian retailers are missing out on these sales, and should improve their fresh food offerings and services to capture a larger share of overall food budgets.

Similarly, sales of private label products in Russia are far lower than in most other European markets. In part, this is because retailers only began launching private label goods in 2000. Since then, these store brands have grown to nearly nine percent of the total fast-moving consumer goods market. But, this is far below private label sales levels in much of Europe, where the average can reach 25-30 percent of the market—Russian retailers have an opportunity to improve. To do so, they’ll need to invest resources to produce a quality line of products that are aligned with the Russian shopper’s fondness for brands.